Bitcoin fell to its lowest level in a month amid a broad withdrawal from high-risk investments in global markets due to concerns over the economic outlook.
The largest digital asset fell more than 4% at one point on Wednesday before paring some of that decline to trade at $56,318. Most other major cryptocurrencies, including ether, also suffered losses, with the second-largest cryptocurrency by market cap down 5.5% in the past 24 hours to $2,374.
Ripple was down 2.8% to $0.5526, Cardano was down 5% to $0.3156, Solana was down 3.2% to $129.4, Polkadot was down 4.2% to $4.0, Binance Coin was down 4.2% to $511, Litecoin was down 1% to $64.9, and Chainlink was down 3% to $10.3.
Worrying economic data
Signs of economic weakness in the United States and China have rattled investors, leading to the worst period for global stocks since the August 5 slump. That pessimistic mood has spilled over into the cryptocurrency market, with traders now focusing on Friday’s U.S. jobs report for clues on whether a deeper slowdown is looming.
At the start of a busy week of economic data, a report showed that US manufacturing activity contracted for a fifth month in August. The Institute for Supply Management (ISM) manufacturing Purchasing Managers’ Index (PMI) for August came in at 47.2, beating expectations for 47.5 and the previous reading of 46.8.
A PMI reading below 50 indicates a contraction in the manufacturing sector, which accounts for 10.3% of the economy.
On the other hand, China’s service sector grew less than expected, according to a private survey, adding to concerns about the health of the economy. The Caixin/S&P Global China Services Purchasing Managers’ Index (PMI) fell to 51.6 in August, from 52.1 in the previous month.
Bearish Bets on Crypto
In the options market, demand has increased to hedge against Bitcoin declines, both in the period following the upcoming US jobs data and after the presidential election in November, according to Sean McNulty, director of trading at liquidity provider Arbelos Markets.
“We’ve seen renewed interest in buying Bitcoin bearish options, particularly for contracts that follow the jobs data at $55,000 and below,” McNulty said, adding that a significant position has also been opened for contracts that expire on November 29 at $35,000.
This could be a hedge against the loss of pro-crypto Republican candidate Donald Trump in the White House race to Democratic Vice President Kamala Harris, who has yet to clarify her position on digital assets.
Other signs of caution include a drop in total open interest — or outstanding contracts — for CME Group’s bitcoin futures to its lowest level since May. Meanwhile, U.S. bitcoin exchange-traded funds are on track for their longest run of outflows since June, according to data compiled by Bloomberg.
Market analyst Tony Sycamore of IG Australia Pty said the balance of risks was tilted towards a potential test of the $52,000-$50,000 price range.
Bitcoin’s rally this year has somewhat faded since hitting an all-time high of $73,798 in March. The challenge is likely to be in the near-term seasonal outlook if historical forecasts are correct. Over the five years through 2023, the cryptocurrency has averaged a September decline of more than 8%.
